Support and resistance indicators for day trading forex

Support and resistance indicators for day trading forex

There are two approaches to support and resistance for day trading forex. One is based on price, and the other is based on volume. On the NinjaTrader platform, we have the accumulation and distribution, which is price-based, and on MT4/MT5, we have the dynamic support and resistance indicator, whilst on both, we have the volume point of control, which delivers our volume-based support and resistance areas. These are defined by the high-volume and low-volume nodes on the chart.

00:00

Webinar introduction and disclaimer

00:00

The webinar begins with a lighthearted introduction and a brief audio check between the hosts. The presenter then highlights an important disclaimer emphasizing the risks involved in trading and advises viewers not to use money they cannot afford to lose. The session will focus on analyzing charts using volume price analysis and price action techniques.

01:00

Overview of volume price analysis (VPA)

01:01

The speaker introduces volume price analysis (VPA), emphasizing it as more than just the relationship between price action and volume. VPA also involves support and resistance levels, candle patterns, and timing. They highlight the importance of understanding these elements, particularly support and resistance, and mention a Twitter message from someone familiar with the forex version of VPA. The fundamental landscape, including news releases, must also be monitored, with tools like Forex Factory and Financial Juice recommended for news feeds, both free and paid versions.

02:12

The discussion continues on analyzing related markets due to their interconnected nature, especially within capital markets and forex currency pairs that reflect broader market sentiment. The speaker notes positive overnight market sentiment and explains how this typically leads to buying commodity currencies like the Australian and New Zealand dollars. However, such reactions do not always occur for various reasons. This sets the stage for introducing a comprehensive forex trading program based on these principles.

03:22

The speaker outlines the forex trading program, which consists of five main modules and several ancillary ones. It was a substantial effort to create but has proven very successful. The program has transformed students’ trading by improving their confidence, consistency, and understanding of market drivers. It incorporates relational and fundamental analysis alongside VPA concepts. The speaker expresses pride in their traders’ achievements and mentions the completion of the program’s development.

04:30

Funded forex program details

04:32

The funded forex program offers traders and students the chance to access trading funds without personal financial risk, starting with accounts from $5,000 up to $2 million. Participants pay only a one-time entry fee and begin at an evaluation stage with options for different account sizes. The program, launched recently, already has participants and aims to support traders as they progress to higher funding levels. Additionally, specialized indicators have been developed to help identify currency flow trends within forex pairs, enhancing trading strategies.

06:00

Currency strength indicators and mean reversion

06:27

The speaker explains that the forex market is best understood through indicators like the currency strength indicator, which tracks what is currently being bought. Forex behaves as a true mean reversion market, where currencies oscillate between overbought and oversold levels before reversing. Unlike stocks, which generally have a bias toward going up since most investors buy expecting gains, forex pairs exhibit more consistent cyclical movements. Traders in forex focus heavily on identifying reversals or joining trends, using these indicators to time their trades effectively.

08:14

The speaker highlights the importance of understanding the current market mood in forex trading, particularly given the 24-hour nature of the market. They note strong overnight performances in global indices like the Nikkei, Dow futures, S&P 500 futures, and the Nasdaq, with a rotation occurring from tech stocks to more value-oriented and defensive stocks. This shift impacts forex traders by influencing market sentiment, which is crucial for determining whether to join ongoing trends or wait for reversals.

09:00

Market sentiment and key economic events

09:28

The speaker reviews the fundamental events affecting currencies, noting a sparse calendar on Forex Factory and recommending Financial Juice for a more comprehensive view. Key upcoming events include speeches by Fed officials Bullard, Williams, and Clarida, which are crucial because their comments can impact markets, especially if they have voting rights on the Federal Reserve committee. The importance of understanding who these speakers are and their influence on market reactions is emphasized.

12:14

Attention shifts to European Central Bank speaker Elaine and Brexit’s ongoing influence on the British pound. The market risk summary highlights positive news such as the Trump administration allowing the Biden transition to proceed and Janet Yellen likely being named Treasury Secretary, which has boosted market confidence by reducing election uncertainty. Despite the ongoing virus situation, recent vaccine developments have added optimism. The speaker suggests piecing together these factors to understand current market conditions.

13:54

The speaker analyzes the GBP/USD currency pair (Cable), noting that it is currently moving sideways without clear momentum. They mention looking for divergence signals and highlight that Cable has provided good examples of support and resistance in recent lessons. Screenshots from previous sessions will be reviewed later to deepen understanding.

14:00

Analysis of Cable (GBP/USD) and trading approaches

14:29

The speaker analyzes the London open for the cable currency pair, noting sideways and choppy price action with potential to move higher. They highlight the pound/New Zealand dollar pair experiencing a significant sell-off driven by factors in New Zealand, visible on the daily chart. The speaker advises traders, especially beginners, to focus on a limited number of currency pairs to understand their movement patterns and characteristics instead of trying to follow too many pairs.

15:45

The speaker contrasts their trading approach with that of their colleague David; while David scans all 28 forex pairs and picks targets, the speaker prefers to concentrate on about six pairs, rotating through them to maintain focus. They compare forex trading to stock day trading, emphasizing the importance of having a watchlist to avoid being overwhelmed by thousands of stocks or multiple currency pairs, and to focus on those with predictable movement patterns.

16:50

The speaker describes their multi-timeframe charting setup using MT5 and MT4 platforms, combining daily, hourly, and lower timeframes to get a comprehensive view of trends and price levels, including camarilla levels updated at different intervals. They also use a renko chart on a 5-minute timeframe to observe price action structure and current congestion with an upward bias. The segment ends with the speaker preparing to hand over to David, who has been analyzing more strongly moving currency pairs, before returning to discuss the cable pair further.

18:30

Volatility spikes and volume analysis on Aussie Dollar

18:31

The speaker discusses a recent spike in volatility across various currency futures on a five-minute timeframe, highlighting several major pairs including the Australian dollar, British pound, and Canadian dollar. All are showing movement in the same direction, indicating strong market activity. The focus then shifts to the Australian dollar, which has been bullish but sideways for about an hour. A sudden surge in volatility and volume suggests market makers are actively involved, aiming to trigger emotional reactions like fear of missing out among traders.

20:07

A rapid price move of around 30 pips in five minutes in the Aussie yen is described as an extreme event, compressing what would normally take about an hour into a short timeframe. This intense activity triggers emotional impulses for traders to jump in quickly. The speaker emphasizes that market makers are likely orchestrating this move, evidenced by high volume, and cautions that it is not a trap but a calculated push designed to induce participation. Attention then turns to spot markets, where the Australian dollar is rising strongly against the US dollar, showing a clear divergence with the dollar weakening.

22:13

The presenter examines multiple volatility indicators and volume metrics during the London open, noting that the Australian dollar is building into a congestion zone. The volume point of control has shifted higher, indicating a developing support/resistance level. On the daily chart, the Australian dollar shows a potentially strong upward candle with significant volume, which could set a positive tone for longer-term trading if it closes with this momentum. The key insight is that the price is moving into a low volume area, suggesting less resistance ahead and easier price movement through that zone.

24:18

The speaker explains the importance of volume point of control (VPOC) as a critical indicator of market support and resistance. When price approaches a low volume area, it can be expected to move through it more easily since there is less volume-based resistance. Conversely, when price nears the VPOC, a high-volume region, the market is likely to congest or slow down as it represents a significant past trading level. This concept applies across multiple timeframes and is valuable for both scalpers and longer-term traders to anticipate price behavior around volume clusters.

26:00

Volume point of control and multi-timeframe trading

26:21

The discussion begins with the importance of slower time frames in trading, as they carry more weight and influence than faster ones. The analysis moves to the 15-second chart, where a volatility trigger was observed followed by significant volume despite weak market rallies. The current market action is being monitored closely to see if the momentum continues.

26:52

The trend monitor is analyzed, showing that the trend remains intact despite attempts to break away from the volume point of control. Although volume is dropping and the market appears sluggish, the trend has shifted from bearish to a less negative state, indicating some underlying strength.

27:15

A sharp move caused the trend monitor to shift into a bright blue bullish signal across various time frames, including daily charts. The broader market sentiment is positive, with attention directed to major US indices like the Dow 30 and Nasdaq, though a previous chart setting had to be adjusted for accuracy.

27:48

The speaker adjusts the charts to focus on the S&P 500 on a five-minute timeframe and confirms the daily view. The market remains within a volatility band influenced by vaccine news and the ongoing pandemic, indicating a cautious but stable trading environment.

28:29

Markets are described as sideways and congested with bullish sentiment contained around the volume point of control on multiple indices. The current trading session is electronic (Globex) as cash markets are closed, and the market is waiting for clearer directional moves amid this congestion.

29:00

The focus shifts to spot markets, particularly the yen complex, where risk currency buying is weak and not showing strong follow-through. The cautious tone reflects uncertainty and a lack of decisive movement in these currency pairs.

29:32

Volume analysis on the dollar shows a market attempting to rally, but volume is decreasing, suggesting the upward move may lack strength. The presence of weakness indicates that while buying exists, it is capped and not fully supported by volume.

29:56

On a one-minute chart, a similar pattern emerges with a surge in volume followed by a decline. The falling volume during the reversal suggests that selling pressure is diminishing, which could support holding positions for potential further gains, though the move remains fragile.

30:33

The market shows fragility with both buying and selling volumes falling, indicating a lack of strong conviction. Despite this, the trend monitor remains bullish (blue), providing some reassurance to stay in positions. The analysis hints at further examination of multiple CSI indicators for additional insights.

31:00

Currency strength indicator extremes and reversal trading

31:00

The speaker analyzes the Australian dollar’s strong upward movement using multiple time frames and the currency strength indicator, noting it is heavily overbought across 1, 5, 10, and 15-minute charts. Simultaneously, the US dollar is sharply declining and oversold. They caution that such extremes suggest potential reversal opportunities, advising traders to watch for flattening and rolling over of strength on shorter time frames as signals to consider short positions anticipating a dollar rise and Aussie fall.

33:02

The discussion emphasizes observing currency strength indicators for extremes, angles of climb or fall, and matching these with currency pairs showing divergence or strong opposing momentum. Currently, related currencies like the Canadian dollar, Swiss franc, and US dollar are moving together, indicating congestion with no divergence, which is less interesting for trading opportunities.

34:04

The Aussie dollar continues to climb but with reduced momentum and remains heavily overbought, while the dollar is heavily oversold. The speaker stresses the importance of selecting the appropriate time frame for trading, comparing it to a three-lane highway where the trader’s focus is the middle lane, balancing faster and slower market movements to suit their trading horizon.

35:04

Using the currency matrix, the speaker illustrates the universal buying sentiment for the Aussie dollar and selling for the US dollar across multiple pairs and time frames. This unanimity confirms strong bullish momentum for the Aussie dollar. The matrix helps identify if the market consensus supports a trade, showing strong buying pressure on the Aussie and heavy selling on the dollar, which is favorable for Aussie dollar trades.

36:38

There is a slight pause emerging in the market as some currencies start to lift off their lows, indicating a potential minor pullback rather than a full reversal. The speaker explains how these minor shifts manifest across different time frames and how to interpret such movements using the currency matrix. Concurrently, some buying is beginning to appear in the US dollar, signaling early signs of change in market dynamics.

38:01

The speaker highlights the importance of analyzing multiple time frames, showing that buying in the US dollar is just beginning on the 15-minute chart while shorter time frames reflect quicker changes. This multi-time frame approach is key to understanding the progression of market shifts and preparing for potential trend changes.

38:55

After a brief technical issue, the speaker resumes by reviewing the currency matrix and Aussie dollar charts, noting a breakup of the previous trends on the one-minute chart. Early signs of buying in the US dollar appear. The importance of focusing on the trading time frame is reiterated, as short-term shifts may not yet be reflected in longer-term charts.

40:50

The speaker examines buying activity in the US dollar on the one-minute chart and contrasts it with five, ten, and fifteen-minute charts where changes are minimal. This highlights the need to tailor trading strategies to specific time frames. A quick look at major currency pairs reveals inverse relationships, helping traders anticipate potential market moves by comparing correlated pairs.

41:58

Using a matrix of major currency pairs, the speaker explains how to interpret volume and price action, especially noting volatility triggers such as on the US dollar Canadian dollar pair. These triggers can signal either reversals or congestion phases, providing traders with important cues about potential market behavior.

43:37

Volatility triggers, indicated by high volume and price movements, often precede either significant reversals or periods of market congestion. The speaker stresses the importance of integrating multiple indicators, including currency matrices, arrays, sentiment data, and external tools like the VIX, to form a comprehensive view of the market’s likely direction.

44:33

From a reversal trading perspective, the speaker looks for volume decline, weakening momentum, and overbought/oversold conditions to identify shorting opportunities early in a trend. Reversal trading demands patience and wider stop losses due to inherent risk but offers potential for greater rewards by entering near trend inception. The trade-off between risk and reward is emphasized, alongside the need for discipline.

46:10

The speaker elaborates on the importance of volume point of control (VPOC) as a strong support or congestion zone where price action is likely to slow or reverse. Because the market moves quickly through low volume areas, these zones provide clues about probable rapid price movements. Understanding these volume-based support levels helps traders anticipate where congestion or reversals may occur, aiding in planning entry and exit points effectively.

48:00

Support and resistance concepts with pivots and camarilla

48:24

The segment explains the concept of support and resistance using floors and ceilings, illustrated with a 15-minute chart example for cable. It highlights a strong downtrend followed by a two-bar V-shaped reversal leading into a congestion phase, where pivot indicators mark resistance and support levels. The longer the market remains in this tight range, the more powerful the eventual breakout tends to be, reflecting Wyckoff’s law of cause and effect.

50:07

The discussion continues on the congestion phase, emphasizing that price action in this phase stores energy that fuels strong breakouts on slower time frames. The camarilla indicator and fractals are used alongside pivots to identify clear resistance and support levels. However, flexibility is necessary as price action is dynamic, representing the collective emotions of traders, which can cause temporary breaks of these levels before returning.

51:12

The speaker points out that the support level in this congestion phase is strong, having rarely been breached. The price action shows higher lows and higher highs, with attempts to break resistance failing and retreating back into congestion. These phases can last a long time and be frustrating, especially with candle and volume patterns indicating weakness and limited upward momentum.

52:35

The segment explains how volume and candle shapes help interpret congestion phases and weak price moves. Without indicators like camarilla, traders rely on candle patterns and manually drawn lines or pivots to define highs and lows in congestion. This method helps identify key price levels and understand current market conditions within the congestion.

53:36

The final segment references chapter seven and applies the concepts to the hourly cable chart, noting the price paused at the R4 camarilla level, confirming the importance of multiple time frame support and resistance. The observed pullback is attributed to current high volatility in the market.

54:00

Cable chart analysis and Brexit impact

54:06

The speaker analyzes the price action of the British pound (Cable) in the context of Brexit uncertainty. Despite a recent pullback, the daily chart shows an ongoing uptrend, but the price is approaching a significant resistance level around 1.3034. The weekly chart suggests Cable might be nearing a major top, with historical reversal points at this level. This key resistance could cause the price to struggle moving higher amid Brexit-related volatility.

55:17

The discussion highlights the importance of viewing multiple time frames to understand price movements. The current pause in Cable’s price is linked to uncertainty over Brexit outcomes, such as the possibility of a deal, interim deal, postponement, or no deal. On shorter time frames like the five-minute chart, the price movement appears sideways, reflecting consolidation. The Renko chart is introduced as a tool that removes candle wicks to clarify price structure and shows an upward bias despite congestion.

56:26

The Renko chart reveals clearer price structure with an upward bias amid congestion, suggesting potential entry points for traders. The speaker reviews Cable’s hourly chart from the previous day, noting an initial pause near a resistance level (R4) around the New York open, which appeared to signal a reversal but then continued higher. This price action included a sharp move lower during the US open that corresponded to a wick on the daily candle, indicating volatility and complex market behavior.

58:18

Attention shifts to key price levels for Cable, particularly the resistance near 133.90, rounded to the nearest zero or five, which often attract institutional orders. The speaker explains that these round numbers are significant due to institutional trading practices and order flow, though warns of market manipulation such as spoofing near these levels. The importance of breaking through these levels to continue higher or reversing with support on faster time frames is emphasized.

01:00:09

The segment concludes with a focus on support levels derived from volatility candles and camarilla pivots on shorter time frames, which provide key areas for price support and resistance. The prior move was a gradual drift higher out of congestion rather than explosive. The CSI indicator shows the pound slightly rolling over on some time frames but generally still aiming higher, while the dollar continues to weaken. Multiple time frame analysis is used to gauge the market’s direction.

01:01:00

Mean reversion cycles and trading styles

01:01:24

The speaker explains the concept of mean reversion oscillations using multiple time frames. On a slower time frame, the price moves in broader cycles, while on a faster time frame, there are smaller oscillations within those cycles. These price cycles sometimes align and sometimes diverge. Traders choose their approach based on their time frame: longer-term traders focus on the broader cycle and ignore minor fluctuations, whereas scalpers capitalize on the smaller oscillations within the larger trend.

01:03:14

The discussion shifts to current market sentiments, focusing on US indices which are showing mixed signals. The Nasdaq appears fragile, while the Dow Jones and S&P 500 are attempting to rally. Prices are fluctuating around a key volume point of control, indicating neither strong upward nor downward momentum. The segment concludes with a brief mention of checking the status of the Australian dollar.

01:03:30

Session wrap-up and funded account program summary

01:03:44

The speaker emphasizes the importance of patience in reversal trading, explaining the need to endure market fluctuations and wait for clear directional movements before acting. They advise setting wider stop losses during reversal trades to accommodate this volatility. The segment also introduces the Quantum Trading education and funded forex program, outlining starting evaluation levels of $5,000, $10,000, or $15,000, with progression through multiple funding levels before reaching $2 million.

01:04:39

The program structure is explained in detail, with funded account levels multiplying the initial evaluation amounts by four. Each level requires meeting a dollar-based target to progress. Only the initial evaluation stage has a time limit of 12 months, focusing on consistency in trading. Success at the evaluation stage allows traders to scale up to larger amounts, effectively leveraging consistent strategies for increased funding.

01:05:39

The funded trading program is exclusive to students enrolled in the Quantum Trading education course, providing an opportunity to apply their knowledge. Existing Quantum Trading software users receive credit toward the education program if upgrading, ensuring they don’t repurchase indicators. The education program is comprehensive, featuring over 450 lessons and 250 hours of video content designed to build confidence in forex trading.

01:07:05

Additional resources are available via the website anacooling.com and Quantum Trading’s platform offerings include MT4/5, NinjaTrader 7/8, and soon TradeStation versions 9.5 and 10. The company is simultaneously launching two TradeStation platforms and plans to port missing indicators to TradingView, enhancing its package offerings.

01:07:58

The TradingView package will soon include premium indicators such as the currency matrix, array, and heat map at an increased price of $894. Current buyers benefit from a discounted rate before the price adjustment. The speaker concludes by mentioning personal plans and inviting viewers to join the next session, wishing them a successful trading day and week.

By Anna Coulling – creator of volume price analysis